When a giant falls – we all hear it

The news that EMS-giant Foxconn is running on thin margins didn’t really strike anyone as “news”. However, that the company is planning to cut its cost by up to USD 2.9 billion during next year most certainly did. An internal company memo, which Bloomberg’s Debby Wu had come across, cites “a very difficult and competitive year ahead,” as the main reason for the cost saving plan. The plan is to cut about RMB 20 billion (USD 2.9 billion) in spending as the company is trying to get its margins up. Over the last 12 months the company has reportedly spent about NTD 209 billion (USD 6.7 billion). Adding to this is that the company is looking to reduce its headcount by laying off about 10% of non-technical staff, the Bloomberg report continues. Most people outside of our industry knows the Taiwanese company as the assembler of Apple’s iPhones, and yes, the iPhone business will be affected by these plans. The EMS giant’s divisions dealing with iPhone assembly will need to reduce costs by RMB 6 billion (almost USD 900 million), but that’s not the end of it, the company is reportedly planning to cut about 10% of non-technical staff. It is worth pointing out that the cost saving measures related to the iPhone making divisions only make up about 30% of the targeted USD 2.9 billion – which means that some 70% are aimed at other units, and there’s really no shortage of hardware brands connected to Foxconn. The review being carried out by our team this year is no different than similar exercises carried out in past years,” Foxconn said in an emailed response to Bloomberg.